Miracles for Rs 7.50

Medical operations are costly, and heart operations cost lakhs. Poor people die or lose limbs because they cannot afford surgery. Some get into the clutches of moneylenders to pay for operations. Medical debt drives millions into poverty.

Amazingly, a government scheme in Karnataka, Yeshasvini, provides medical insurance that even the poor can afford, covering 1,700 sorts of operations (on the heart, brain stomach, gall bladder, eyes and much else). The cost? Just Rs 7.50 per month. A subsidy of Rs 2.50 from the state government reduces the premium to Rs 5/month.

You might think that a scheme with such a low-cost scheme will fail financially and need a government rescue. But Narayana Hrudayalaya, the Bangalore-based hospital which persuaded the Karnataka government to launch the scheme, says the scheme is currently in surplus. It is now being expanded in Karnataka, and copied by other states.

What are the conditions for successful replication?

It must be a group scheme: the premiums of the healthy members finance the sick. Voluntary membership must be avoided: only sick people will tend to subscribe, making the scheme unviable.

The numbers must be large (preferably lakhs), spreading risks.

Premiums must be collected in advance, providing a corpus for operations.

Premiums must be collected from the group. Collecting from individuals will hugely increase administrative costs.

The premiums should go into an account operated by an independent Administrator who gets competitive bids from hospitals that minimize operation costs. The Administrator should pay the hospitals directly: the patients should pay nothing.

The scheme must be limited to problems it seeks to cover. A scheme for operations should not also cover measles or dementia.

A good NGO is a must to lend credibility, reduce fraud, and mobilize communities.

Yeshasvini started by covering 17 lakh members of cooperatives, which deduct the premiums from members’ accounts. Other groups (microfinance groups, forest management groups) can follow suit.

Yeshasvini is supposed to work on the principle that only 0.08 % of the population typically needs surgery in any year. A large group of 10 laky will typically need 800 operations/year. If operations on average cost Rs 10,000, that means a total cost of Rs 80 lakh. Ergo, if each of the 10 lakh members pays a premium of Rs 80 per year, that will provide enough money for the operations. Add a bit more for administrative costs and testing, and a premium of Rs 90 per year—or Rs 7.50 per month—should suffice.

This sounds impressive. But I was disturbed that a brochure of Narayana Hrudalaya claims that in one year Yeshasvini financed 9,100 operations and 36,000 outpatient consultations in the state’s 83 hospitals. Assuming operations at 0.08% of members, 17 lakh members should have needed need only 1,360 operations. Why does the brochure talk of 9,100 operations, and how were these financed ? Have other sorts of operations been added to inflate the figure? We need satisfactory answers. Still, the underlying idea is fabulous.

A recent article (Devadasan and others, EPW 10/7/04), looks at 12 community-based health insurance schemes. Some cover a few thousand people, and cannot be scaled up. But lakhs are covered by schemes of famous NGOs (SEWA, Karuna Trust). Most big schemes have formal links with a major insurance company, instead of running insurance schemes themselves. Virtually all these NGOs depend on private hospitals. None has adopted Yeshasvini’s idea of an independent administrator getting competitive bids from hospitals.

Research shows that poor people are unwilling to pay premiums upfront, or more than Rs 20-60/year. They typically want to pay only when they are sick. They suspect they will get no benefit from advance payments, and feel they cannot afford to cover entire families (Rs 7.50/month for a family of six means Rs 540/year, a sizable upfront premium). This is why individual subscriptions fare poorly: a SEWA survey showed that only 10-50% of people were willing to subscribe. Group schemes with compulsory coverage work best.

Most poor people are not members of groups, and will be bypassed by community health insurance. Even for those covered, questions can be asked of the quality of treatment in some hospitals. Yet such caveats look churlish in the face of what has been achieved.

When I visited Narayana Hrudayalaya, I saw the infant’s section. A dozen tiny children with malfunctioning hearts had been operated on and were in intensive recovery. In bed after bed, tiny children lay with respirators on their noses, eyes closed, and their lungs pumping. It was a breathtaking, heart-warming sight. Rows of tiny children that would normally have died had, as though by a miracle, been given the gift of life. It made the tale of Lazarus look tame.